4 Ways Blockchain Will Change Supply Chain Forever

4 Ways Blockchain Will Change Supply Chain Forever

The supply chain industry isn’t known for being a first adopter – it’s still learning to use data, leverage mobile devices and take advantage of the sharing economy. This might be changing though.

Last week, eft attended the CSCMP Benelux organized “Blockchain for Transport & Logistics: Hype or Opportunity?” conference, and one thing is for sure, the technology is making waves. With only around 50 attendees expected, the 125 person turnout with participants ranging from Amazon to PwC, was beyond expectation. In addition, the message was clear: Supply Chain is ready to get on-board with blockchain.

What is blockchain?

We’ve really entered the age of the buzz-word – ‘big data’, ‘innovation’ etc. It looks like Blockchain might be next on the horizon. But what is it? Blockchain is a technology that allows all users to know who owns what, when. It is the same technology behind Bitcoin, which has helped propel it into headlines today. At its most basic level, it works off of a digitized ledger that every party in the chain has a copy of. Given this transparency, it means that there is an immense amount of collective security. The bigger the user group, the more the security.

It’s important to note that there are two types of blockchain – public networks and private ones. The difference is quite simple really, but important. Public blockchains are like bitcoin: available to anyone. Private blockchains are closed – ie. A group of organizations using a blockchain between them to exchange a certain type of information. At present, bitcoin is the major public blockchain. Most parties in attendance at the event that were working with the technology were using closed platforms to understand the ins and outs of its functionality.

What’s the status of blockchain in supply chain?

Huge number of major corporations are exploring the usage of blockchain and even implementing the technology. This has been especially prevalent in fintech and banking where applications are clear-cut. That being said, with trust, data interchange, millions of moving parts, blockchain’s application to supply chain seems like a natural second step. On the back of attending the conference last week, it seems that the technology is truly in its most basic state right now when it comes to logistics. There are a number of start-ups and incumbents looking to leverage the technology to solve critical challenges in the industry from improving payment systems to transferring and verifying shipping documentation.

Here are a selection of the latest developments:

4 possible applications:

Smart contract scan automate key processes – Smart contracts are contracts that can executed automatically based on the fulfillment of certain conditions. Given the amount of complex paperwork in supply chain, there is the potential for creating smart contracts in many areas for speed, trust and security to name a few.

Increase trust and security - Blockchain has the potential for adding trust and security to the transfer of assets in the supply chain (documents, physical assets, currency etc.) Can be hugely beneficial especially with – for example, helping SMEs with speeding up payment processes (credit checks, payment terms, shorten the order to cash cycle etc.)

Change data exchange methods - Blockchain could also fundamentally change how data is exchanged in supply chain – for example replacing the documentation between parties during shipments through some carefully executed blockchains and smart contracts could eliminate major steps in shipping or moving goods: bill of lading, customs papers, etc. It also can eliminate a number of third parties involved in many transactions.

CSR, quality control and maintenance reporting are other areas blockchain could be used effectively in the supply chain leveraging the trust, security and automation aspects of the technology.

4 possible barriers:

Convincing all parties to join – it’s been difficult enough getting most supply chain partners to agree on current data exchange standards, what’s going to change with regards to blockchain?

Tech barriers: the difficulties of scaling blockchain – a blockchain is inherently inefficient because it involves the continuous updating of the ledger. If a system is to be widely adopted, can technology cope?

Bridging trust between what the block says vs. physical reality – Blockchain might help guarantee that transactions have happened and when, but they don’t guarantee anything if anything physical is associated with the transaction. Ie. Blockchain can’t verify a product’s authenticity or if two parties are colluding on something.

Blockchain doesn’t prevent parties from colluding. While the blockchain is visible to all, anything that happens outside of the ledger is anyone’s guess. There are workarounds to this such as using IoT to automatically fulfil smart contracts and avoid any type of tampering, but these are all in their very early days.

One of the most interesting take-aways from the day was the notion that blockchain will make real supply chain collaboration possible. If that’s the case and they get it right, where does that leave solution provider incumbents? On the other hand, what’s going to drive the industry to solve collaboration or end-to-end visibility this time?

Written by Haley Garner, the Head of Research at eft Supply Chain Logistics Intelligence, and Sarah Reynolds, the Project Director at eft. This blog was also posted on LinkedIn.

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